“We moved to an Overweight position in the equity market a couple of weeks ago based on U.S. policymakers’ near-term compromise and amid a global economic recovery that appears to be gaining momentum,” Mr Zyblock said in a note to clients this week.

“We find that stocks with good value attributes tend to outperform the market in a ‘risk-on’ environment.”

Mr. Zyblock said he is currently putting more portfolio emphasis on cyclical, high beta sectors including Industrials, Materials, and Energy.

Furthermore, he is focused on finding value names that are supported by relatively strong and/or reliable fundamentals. In other words, those less likely to evolve into a value trap.

“In fact, our past analysis shows that buying a basket of “cheap” stocks is an attractive portfolio strategy through time even though the individual constituents’ returns are quite varied,” he wrote.

“Nearly 40% of the constituents can be underwater in any given quarter while about half actually outperform the broader composite. This is likely due to the inclusion of both true “value stocks” as well as “value traps” in the basket.”

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